I’ll be heading to the Rio Hotel and Casino tomorrow for three days of continuing education. In a little over two weeks, the poker world will be descending on the Rio for the annual World Series of Poker. (I’m probably one of the few individuals who is in both groups.) The 2016 WSOP consists of 68 “bracelet” events culminating in the championship event that begins on July 9th. There are also daily tournaments, satellite events, and cash games at the Rio. Other Las Vegas hotels run poker tournaments, so there are tournaments for almost any size of buy-in available.
I’ve been writing about the tax impacts of the WSOP for years. The first post, back in 2007, noted that the Rio refuses to follow the rules regarding issuing W-2Gs when a poker player presents a correctly completed Form 5754. In 2011 I looked at staking and the WSOP. I presented “updates” in 2014 and 2015 (though essentially nothing has changed).
And that’s still the case today. The Rio won’t issue multiple W-2Gs (though they’re getting closer to admitting the real reason: cost) and the IRS hasn’t come after them (yet). The onus remains on the player to issue required paperwork and withhold taxes when required when the player has backers. (See the 2011 and 2015 updates.)
I have received several inquiries from non-Americans who plan on playing at the WSOP regarding withholding of US taxes and if there’s any means of avoiding this. As noted in IRS Publication 515, withholding is required on gambling winnings (for poker tournaments, of $5,000 or more net) except for residents of these countries:
Tax treaties. Gambling income of residents (as defined by treaty) of the following foreign countries is not taxable by the United States: Austria, Belgium, Bulgaria, Czech Republic, Denmark, Finland, France, Germany, Hungary, Iceland, Ireland, Italy, Japan, Latvia, Lithuania, Luxembourg, Netherlands, Russia, Slovak Republic, Slovenia, South Africa, Spain, Sweden, Tunisia, Turkey, Ukraine, and the United Kingdom.
Gambling income of residents of Malta is taxed at 10%.
If you’re from one of these countries, you should not have tax withheld from your winnings. My understanding is the Rio is authorized to issue Individual Taxpayer Identification Numbers (ITINs) to winners. (If you already have an ITIN, make sure you bring that number with you.) You may still owe tax to your home country for those gambling winnings; be aware that the IRS does share information with other countries’ tax agencies.
But what if you’re from a country that does not have a tax treaty with the US? Suppose you’re from Portugal, and you play in a WSOP event and are lucky enough to cash. Let’s say your net win is $100,000. Will you get the full $100,000 or not?
The Rio is required to withhold 30% of your net win, so you will receive $70,000 in my hypothetical. You will also receive paperwork showing the withholding (IRS Form 1042-S). If you owe income tax to Portugal on your gambling winnings, you should be able to claim a tax credit for the double taxation.
I’ve been writing about this for nearly a decade and almost nothing has changed. Eventually the WSOP will be called out by the IRS for their violation of the rules on issuance of W-2Gs (and 1042-S’s). It doesn’t look like that will happen in 2016, though.
